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License to operate = License to finance illegal operations?

License to operate = License to finance illegal operations?. An overview of policy options to regulate financial institutions servicing deforestation. Background (1). AIDEnvironment and Profundo RIIA-meeting on FLEGT Sectors involved in illegal logging: Timber Pulp and paper Palm oil Soy

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License to operate = License to finance illegal operations?

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  1. License to operate =License to finance illegal operations? An overview of policy options to regulate financial institutions servicing deforestation

  2. Background (1) • AIDEnvironment and Profundo • RIIA-meeting on FLEGT • Sectors involved in illegal logging: • Timber • Pulp and paper • Palm oil • Soy • Mining

  3. Background (2) • Simple question: • Is it allowed to finance a timber trader or logging company that is involved in illegal logging? • No simple answer • Conclusion: we need more research

  4. Background (3) • Study: Preventing the financing of illegal activities outside the EU by European financial institutions • Research subsidy from NL-ministry • Research approach

  5. General outcome (1) • There is no ‘living’ policy. The environmental policy towards financial sector is 20-30 yrs behind • ‘Billions’ of voluntary measures without follow up: • UNCED, UN Finance Initiative, UN Global Compact ... • BUT: ...

  6. General outcome (2) • Regulation of financial sector did develop quickly • Financing terrorisme, risks for financial market in general and drugs (money laundering), debt crises • Crucial terms: • Risks  Riskmanagement • Integrity  Internal integrity policy • Anti-money laundering

  7. Risks • Reputational risk • Operational risk • Legal risk • Concentration risk • Credit risk

  8. General outcome (3) • Not only words but implementation: • Basel Committee on Banking Supervision • Financial Action Task Force on Money Laundering • EU-legislation • National legislation: licensing system • Supervising authorities

  9. General outcome (4) • Great amount of very good policy instruments at hand • Leading to: • Great amount of policy options • Mainly at: • EU-level • National level

  10. Line 6: Law enforcement Line 5: Public control Line 4: Banking supervision Line 3: External controllers Line 2: Shareholders Line 1: Internal procedures Core values Six Lines of Defence Model

  11. Example 1: National level • Act on Supervision of the Credit System • licensing • Regulations are already in place • They just don’t know!!! • Easy task: 1. Make sure they do know, 2. Start court cases

  12. Example 2: EU level • Money Laundering Directive(s) • Make money laundering legislation applicable to loans plus: integrate timber • Capital Adequacy Directive • New implementation guideline: Banks have to show how they make sure that not involved in activities with social or environmental damage • Not public • Accounting Directive

  13. EU level: new approach • Lamfalussy Report: • THE FOUR-LEVEL APPROACH to implement new policy measures • Impact on existing procedures, speed up regulatory process • Framework  implementation measures

  14. So what? • More reasearch and debate is needed • Strategy and action is needed • New coalitions are needed • Two initiatives in NL • FoE NL: MMOT • WWF NL: report

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